The Best Way to Roll Over Your IRA in 2023

IRA Rollovers for 2023
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If you have decided an IRA rollover is the right move for your retirement savings strategy in 2023, doing it the optimal way will ensure you avoid taxes or penalties. Here is an overview of the very best practices for rolling over your Individual Retirement Account funds properly.


Initiate a Direct Rollover

The best route for most people is to do a direct rollover, also known as a trustee-to-trustee transfer. With this method, the distribution check from your old IRA custodian is made payable directly to the new The funds transfer straight between the financial institutions with you never taking personal possession of the assets.

This avoids potential pitfalls and errors that can happen with indirect 60-day rollovers when the check is paid out to you first. Direct rollovers are simple, fast, and eliminate any worries about missing the 60-day deadline. Contact your current custodian to see if they offer this convenient option before pursuing an indirect rollover.

Research Your New Custodian Thoroughly

Take time to carefully evaluate new IRA providers and select one that aligns with your investment objectives and offers the specific options you want at competitive fees. Look for an IRA custodian that has plenty of experience handling rollovers and will partner with you throughout the process. Many financial institutions have dedicated teams that specialize in IRA rollovers.

Roll Over the Full Amount

If you have to do an indirect 60-day rollover, be sure to deposit the entire taxable amount of the distribution into the new IRA within the deadline. If the custodian withholds 20% for federal taxes, you’ll need to make up that amount from other sources when making the deposit. Any shortfall will be considered an early withdrawal subject to taxes and penalties.

Report the Rollover on Your Tax Return

You must report any IRA rollover on IRS Form 8606 as part of filing your federal income tax return for the year in order for it to remain tax-free. Failure to disclose or properly report an IRA rollover can potentially trigger IRS penalties and jeopardize the tax-deferred status. Including Form 8606 documents you followed the rules.

Understand the One Rollover Per Year Limit

According to IRS rules, you can only complete one 60-day IRA-to-IRA rollover over a 365 day period. This applies across all your IRAs cumulatively. Make absolutely sure you have not already done a rollover within the past 365 days when initiating another one. Multiple rollovers in one year will result in taxes and penalties.

Rollover Inherited IRA Funds Correctly

If you are rolling over an inherited IRA, be sure the assets get transferred to a properly titled inherited IRA account rather than your own regular IRA. Failing to do this can disqualify the tax benefits of the inherited IRA. The rules differ for spousal and non-spousal beneficiaries.

Consult With a Tax Pro if Needed

If you have any doubts about the proper way to handle your IRA rollover or have a particularly complex situation, do not hesitate to first meet with a qualified tax professional or IRA specialist. A few hundred dollars of expert advice upfront can potentially save you thousands in taxes and penalties.

Following these best practices will set you on the right course for seamlessly transitioning your IRA savings to a new custodian in 2023. Do your homework, understand the rules thoroughly, and consult experts when needed. With proper planning and care, your rollover can go off without a hitch.